The Income Tax Appellate Tribunal, Kolkata, has held that a notice issued under Section 148 of the Income Tax Act is invalid if issued before the formal communication of sanction under Section 151, even if internal approval was recorded earlier. This ruling reinforces the non-negotiable requirement of procedural due process in tax reassessments.
Background & Facts
The Dispute
The appellant, Ran International Pvt. Ltd., was subjected to a reassessment for Assessment Year 2009-10 following information received from the DDIT Investigation Unit, Kolkata, regarding unexplained cash deposits of ₹3,12,85,000 during Financial Year 2008-09. The Assessing Officer (AO) initiated proceedings under Section 147 and issued a notice under Section 148 on 29.03.2016. The assessee filed a return on 05.09.2016 declaring income of ₹34,072. The AO subsequently added ₹3,12,00,000 as unexplained cash credit under Section 68. The Commissioner of Income-tax (Appeals)-2, Kolkata, upheld the AO’s order.
Key Facts
The assessee received cash deposits totaling ₹3,12,85,000 during FY 2008-09, relevant to AY 2009-10
The DDIT Investigation Unit, Kolkata, communicated information to the AO via letter dated 22.03.2016
The AO recorded reasons to believe on 29.03.2016 and issued notice under Section 148 on the same date
The approval under Section 151 was granted by the Principal Commissioner of Income Tax (PCIT), Kolkata-3, on 29.03.2016, as evidenced by internal notings
The formal communication of this approval to the AO’s office was received only on 31.03.2016
The assessee challenged the validity of the notice and consequent assessment on grounds of procedural irregularity
Procedural History
22.03.2016: DDIT Investigation Unit communicates information regarding unexplained cash deposits to the AO
29.03.2016: AO records reasons to believe and issues notice under Section 148
29.03.2016: PCIT, Kolkata-3, grants approval under Section 151 (internal notings)
31.03.2016: Formal communication of Section 151 approval received by AO’s office
05.09.2016: Assessee files return declaring income of ₹34,072
18.12.2019: Ld. CIT(A) confirms the AO’s order
18.12.2019: Appeal filed before ITAT Kolkata (ITA No. 1823/KOL/2024)
20.04.2026: Hearing conducted before ITAT Kolkata
28.04.2026: Judgment pronounced
Relief Sought
The appellant sought quashing of the notice under Section 148, the reopening of assessment under Section 147, and the assessment order dated 18.12.2019, on the ground that the notice was issued prior to formal communication of sanction under Section 151.
The Legal Issue
The central question was whether a notice issued under Section 148 of the Income Tax Act is valid if issued before the formal communication of approval under Section 151, even if the competent authority had internally recorded approval on the same date.
Arguments Presented
For the Appellant
The appellant’s counsel argued that the notice under Section 148 was issued on 29.03.2016, while the formal communication of approval under Section 151 was received only on 31.03.2016. Relying on the co-ordinate bench decision in Paras Plaza Pvt. Ltd. and the Supreme Court’s ruling in Sethi Auto Service Station v. Delhi Development Authority, the counsel contended that internal notings do not constitute a legally effective order. Only when the approval is formally communicated to the AO does the authority to issue a notice under Section 148 arise. The issuance of notice prior to communication rendered the entire reassessment void ab initio.
For the Respondent
The Revenue argued that the approval under Section 151 was granted on 29.03.2016 and that departmental practice permits oral approval followed by delayed formal communication. It was submitted that the AO acted in good faith and that the delay in communication was merely administrative. The Revenue contended that the substance of approval had been accorded on the date of issuance of notice and that technicalities should not defeat the revenue’s legitimate claim.
The Court's Analysis
The Tribunal examined the statutory scheme under Sections 147 and 151. It noted that Section 151 mandates that no notice under Section 148 shall be issued unless the prescribed authority has granted approval. The Tribunal emphasized that the law does not permit reliance on internal notings or uncommunicated decisions.
"It is trite to state that notings in a departmental file do not have the sanction of law to be an effective order. A noting by an officer is an expression of his viewpoint on the subject. It is no more than an opinion by an officer for internal use and consideration of the other officials of the department and for the benefit of the final decision-making authority."
The Tribunal relied on the Supreme Court’s holding in Sethi Auto Service Station and Bachhittar Singh v. State of Punjab, which establish that an order of a statutory authority only becomes effective upon communication to the affected party. Internal notings are not binding, and rights or liabilities cannot be created without formal communication.
The Tribunal further noted that the co-ordinate bench in Paras Plaza Pvt. Ltd. had faced an identical factual matrix - where notice was issued on 26.03.2019 and approval was communicated on 28.03.2019 - and had quashed the assessment. The facts in the present case were materially identical.
The Tribunal rejected the Revenue’s argument that departmental practice justifies non-compliance. It held that procedural compliance under the Income Tax Act is not a mere formality but a substantive legal requirement. The issuance of notice before communication of approval violates the mandatory condition under Section 151 and renders the notice, and all consequential proceedings, null and void.
The Verdict
The appeal of the assessee was allowed. The Tribunal quashed the notice issued under Section 148 dated 29.03.2016, the reopening of assessment under Section 147, and the assessment order passed by the AO. All proceedings initiated pursuant to the invalid notice were set aside. The reassessment for AY 2009-10 stands cancelled.
What This Means For Similar Cases
Procedural Compliance Is Non-Negotiable
Practitioners must verify the date of formal communication of Section 151 approval, not merely the date of internal notings
Any reassessment initiated before formal communication of approval is void, regardless of the substance of approval
The burden is on the Revenue to prove that approval was communicated prior to issuance of notice
Internal Notings Are Legally Insignificant
Departmental files showing approval by a superior officer cannot substitute for formal communication
Courts and tribunals will not accept "de facto" approval; only "de jure" communication counts
Tax officers must ensure that the approval letter is received and dated before issuing any notice under Section 148
Precedent Now Binding Across ITAT Benches
The decision in Paras Plaza Pvt. Ltd. is now binding on all benches of ITAT Kolkata
Similar cases across other jurisdictions may now be challenged on identical grounds
Practitioners should raise this objection at the first opportunity - in objections to notice, before CIT(A), and in appeals
